The April 2024 Consumer Price Index of All Urban Consumers (CPI-U) report indicates that inflation rose by 0.3% for the month, a notch below March’s increase (+0.4%). These data were released at 8:30 am EST on Wednesday, May 15, 2024, by the Bureau of Labor Statistics. Before seasonal adjustment, the year-over-year (Y-o-Y) inflation rate in the all-items index grew by 3.4%, which is also a slowdown from March’s 3.5% Y-o-Y CPI reading.
CNBC noted that April’s monthly increase came in below economists’ consensus estimate of 0.4%, while the Y-o-Y figure was in line with expectations. The slowdown should be welcome news for the Fed, as the FOMC’s projection of 100 basis points of rate cuts has been derailed by the stubborn pricing pressures. However, with Fed Chairman Jerome Powell cautious about encouraging another acceleration, it will be interesting to see how his tone evolves in the weeks ahead.
The Federal Reserve’s federal funds rate remains at 5.25% to 5.5%, and the ascent has been a burden on the housing market and Americans strapped with credit card debt. With record U.S. government and consumer credit card debt still present, monetary easing would certainly help reduce the strain on low-income households.
As expected, global markets responded positively to the CPI slowdown, with American and European indices climbing, while the NASDAQ Composite hit a new all-time high. Similarly, Treasury bonds rallied as rate-cut expectations increased. In contrast, the U.S. dollar suffered as market participants adopted a more dovish view.
March’s headline inflation deceleration was driven by lower utility prices (-2.9%), used cars and trucks (-1.4%), and food at home (-0.2%). Core inflation (which excludes the impacts of food and energy), rose 0.3% in April, a drop from the 0.4% seen in January, February, and March. The indexes for used cars and trucks, household furnishings and operations, and new vehicles helped lead the declines.
Source: Bureau of Labor Statistics
Food Prices
The food index was flat in April after jumping by 0.1% in March. Headlining the pullback, the index for meats, poultry, fish, and eggs fell in April, led by a 7.3% decline for eggs. Fruits and vegetables and nonalcoholic beverages also showcased deflationary trends:
- Cereals and bakery products (+0.6%)
- Meats, poultry, fish, and egg (-0.7%)
- Dairy and related products (+0.1%)
- Fruits and vegetables (-0.8%)
- Nonalcoholic beverages (-0.2%)
In addition, food away from home rose by 0.3% in April, which matches March and annualizes to 3.67%. As a result, restaurants are still passing through higher wage and input costs.
Energy Prices
Mirroring the March reading, the energy index rose +1.1% in April, with gasoline up 2.8% and fuel oil up 0.9%. Conversely, the index for natural gas fell 2.9% and electricity prices eased by 0.1%.
Core April 2024 CPI
The April core CPI rose by 0.3% month-over-month, which was below January, February, and March’s 0.4% reading. On a Y-o-Y basis, the metric rose +3.6%. Below is an itemized breakdown of the main price fluctuations seen in the core CPI reading:
- Shelter index: (+0.4%) [March: +0.4%]
- Rent index: (+0.4%) [March: +0.4%]
- Owners’ equivalent rent: (+0.4%) [March: +0.4%]
- Motor vehicle insurance: (+1.8%) [March: +2.6%]
- Medical care services: (+0.4%) [March: +0.6%]
- Physician services: (+0.1%) [March: +0.1%]
- Hospital services: (+0.6%) [March: +1.0%]
- Airline fares: (-0.8%) [March: -0.4%%]
Source: Bureau of Labor Statistics
Seasonally Unadjusted CPI Data for April 2024
Before seasonal adjustments, the CPI-U for April 2024 increased (+3.4%) Y-o-Y, rising to an index level of 313.548. Since these figures are unadjusted, they include regular seasonal price fluctuations that can create volatility in the results.
Source: Bureau of Labor Statistics
Gold Continues to Climb
With the CPI slowdown supporting lower interest rates and a weaker U.S. dollar, gold has basked in the glory. Since gold futures contracts are priced in USD, a weaker greenback makes it more affordable for foreign investors to purchase the yellow metal. As such, lower Treasury yields, a weaker dollar, and increased rate-cut enthusiasm have created the perfect environment for gold enthusiasts.
However, with other commodities joining the party, expectations of a dovish Fed could increase inflation in the months ahead, if assets like oil, gasoline, and food commodity prices rise. Moreover, lower interest rates increase American’s disposable income, which could boost consumption during the summer months when economic activity is typically strong.
Thus, 2024 winners like gold, silver, Bitcoin, and Ethereum are betting that the Fed will find it difficult to tame inflation without causing a recession that sparks the next round of quantitating easing.
Are you thinking about diversifying into precious metals? Talk to your financial advisor about initiating a gold IRA account today, allowing you to invest in this red-hot asset on a tax-advantaged basis. Additionally, our complimentary CPI inflation calculator remains at your disposal, enabling you to assess inflation’s impact on your finances. Remember, seek the guidance of a financial advisor before making any investment decision.
Alex Demolitor is a Canadian financial writer hailing from Halifax, NS. Alex has a Bachelors Degree from King's College and passed the CFA Exam Level III. He specializes in fundamental analysis of the stock, bond, commodity, and FX markets. He also covers US & Canadian economic indicators.
